Know Your Small Business Retirement Plan Options: What is a Payroll Deducted IRA? | Millennium Trust Company

Know Your Small Business Retirement Plan Options: What is a Payroll Deducted IRA?

March 18, 2020
By Millennium Trust

Understanding different retirement plan options can be tricky, especially when many people are only aware of 401(k) plans. When a 401(k) isn’t the right fit for a business of a smaller size, a standard Payroll Deducted IRA could potentially be the best fit to help you and your employees save for retirement.

Here’s what you need to know when it comes to Payroll Deducted IRAs:

TARGET DEMOGRAPHIC: A Payroll Deducted IRA can work for any size business that wants to help its employees save for retirement.

EMPLOYER CONTRIBUTIONS: There are no employer contributions in a Payroll Deducted IRA. The employer simply authorizes payroll deductions for traditional or Roth IRAs that their employees establish with a financial institution selected by the employer.

Learn more about Payroll Deducted IRA programs.

EMPLOYEE CONTRIBUTIONS: Employees can contribute $6,000 annually to either a traditional or Roth IRA in 2019 and 2020. “Catch-up” contributions allow accountholders over age 50 to contribute up to $7,000.

EMPLOYER FILING REQUIREMENTS: There are no employer filing requirements with a Payroll Deducted IRA.

PAYROLL DEDUCTED IRA PROS: A standard Payroll Deducted IRA program works for any size business. It’s also easy to set up and run. Once you create the plan, employees simply elect a portion of their pay to be automatically contributed their new Roth or traditional IRA.

  1. Considered the easiest retirement program to set up and operate

  2. Low cost retirement program for the employer

  3. Little administrative requirements


  1. Low contribution limits compared to other retirement programs

  2. Employees may not be able to deduct their contributions

Is a Payroll Deducted IRA right for your business and employees? Try our Retirement Savings Selector Tool for Small Businesses to find the retirement plan type that could be the best fit.

Try our Selector Tool

The material in this blog is presented for informational purposes only. Millennium Trust Company performs the duties of a directed custodian, and as such does not sell investments or provide investment, legal or tax advice.

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